A question, CEO pay versus regular worker pay ?

[bUU]

Of course, compensation has little to do with how hard the work is...

Very true.

 

[MoneyIsMyHobby]

Come to Mass! Our niece in law is a second year third grade teacher making $80k. (And summers off)

How is COL in Mass? Can I live on $80k there? I'll start packing tonight! Now to just learn to like kids... J/K

MIMH

 

[NW-Bound]

I consider myself a card-carrying capitalist, but the above Web page shows how some CEOs get away with a lot of bacon.

They are not afraid of Porky; they would render all the fat out of Porky, and turn him into pork rind.

While it doesn't make unjustified CEO compensation right, the fact is the phenomena is not confined to CEO's. How about major sport pro athletes, folks at the top of the entertainment business, etc. ? The pay pyramid is very steep near the top of many professions...

Taleb in one of his books (I forgot which one) made the point that modern-day economics created the phenomenon of "winner takes all". That is particularly true in the entertainment business and professional sports. In the old days before TV and radio, less than first-class singers and entertainers could make money in traveling entertainment troupes and circus. Now, everybody wants to go see the best, or what is purported to be the best.

But these sport players and entertainers are rated by the audience that they serve. One may complain that the masses have poor taste, but hey, that's how people want to spend their money.

On the other hand, some CEOs get away with lousy performance, and still get rewarded handsomely. They have the board of directors in their pocket. As shareholders, we have no recourse but to sell the lousy stocks. Is there a better way?

Bogle had been vocal about corporate governance for a while, trying to get institutional investors such as MF and pension managers to be more active in selecting good company directors. I have not heard much about his activity in this area recently. I guess he gave up.

 

[foxfirev5]

IMHO us passive indexers are contributors to the problem. A good old boy network of employee and board. It's been that way forever. As passive/indexers we take whatever they give us, You can't have it both ways.

 

[NW-Bound]

IMHO us passive indexers are contributors to the problem. A good old boy network of employee and board. It's been that way forever. As passive/indexers we take whatever they give us, You can't have it both ways.

Bogle said that some MF managers told him essentially the same thing in a conference when he pushed for more activism. He did have some retort to that.

 

[ERD50]

But don't lose sight of the implications. It means that the same level of hard work that you and I put in will yield substantially inferior results for our children, and fewer people overall will enjoy the success we have. The system has reduced the number of "winners of the game" while the number of players has increased.

I think the people in 3rd world countries who now have jobs doing some of the 'menial work' that was done here a while ago would disagree with you.

They may be making a fraction of the wages we did, but it is a big step up for them in standard of living. And I think most would agree that a step up in their standard of living means more to them then a step up in our standard of living ( the "marginal utility" aspect).

-ERD50

 

[ownyourfuture]

As I said, some folks certainly have an easier path to success than others, but you see so many folks self-sabotage their financial situation. I'm sure my tenants think that the man is keeping them down... as the Amazon truck shows up with their weekly delivery of "stuff they don't need" while they're racking up late fees to me for not being able to pay their rent on time. They're living room TV is literally twice the size of mine - just one more example.

Furthermore, as you say, it may be hard for people to acknowledge their privilege, but I think it is just as hard to get people to admit their own fault in their situation instead of thinking it is something outside their control (such as prejudice, discrimination, birthright, etc.).

MIMH

AAA+++

 

[Dash man]

How is COL in Mass? Can I live on $80k there? I'll start packing tonight! Now to just learn to like kids... J/K



MIMH

It’s not worth it, no matter what the pay!

 

[bUU]

Taking the nation as a closed system that hasn't been the case for over a decade.

I think the people in 3rd world countries who now have jobs doing some of the 'menial work' that was done here a while ago would disagree with you.

As I said, "Taking the nation as a closed system..."

 

[ERD50]

As I said, "Taking the nation as a closed system..."

OK, 24 posts back! -ERD50

 

[copyright1997reloaded]

As a stockholder, I get to vote with my shares to approve or not approve the board, and as a result the CEO's compensation. If I don't like the result or what they do, I can sell my shares and move on to where I think the situation is more 'fair'.

As a non-stockholder, I don't care how much the CEO makes, nor should I have a say.

No one forces me to own stock in a company whose policies I don't agree with. No one forces me to buy products from a company whose policies I don't agree with. [There are exceptions to this, which should be unconstitutional, but that still sometimes been forced upon us. ]

 

[NW-Bound]

As a stockholder, I get to vote with my shares to approve or not approve the board, and as a result the CEO's compensation. If I don't like the result or what they do, I can sell my shares and move on to where I think the situation is more 'fair'.

As a non-stockholder, I don't care how much the CEO makes, nor should I have a say.

No one forces me to own stock in a company whose policies I don't agree with. No one forces me to buy products from a company whose policies I don't agree with. [There are exceptions to this, which should be unconstitutional, but that still sometimes been forced upon us. ]

You are obviously not an indexer, nor an MF shareholder.

A large percentage of my equity allocation is in individual stocks, but I still have quite a bit in ETFs.

And I will admit that I do not know all the things that are going on at the corporations that I own, although the infamous CEOs that I do not care for, I stay clear of their stocks. Have not shorted any, but maybe sometimes...

If you have a pension, you do not have a say in how the pension manager invests. That's why Bogle pushed for activism by institutional investors.

 

[Texas Proud]

Taleb in one of his books (I forgot which one) made the point that modern-day economics created the phenomenon of "winner takes all". That is particularly true in the entertainment business and professional sports. In the old days before TV and radio, less than first-class singers and entertainers could make money in traveling entertainment troupes and circus. Now, everybody wants to go see the best, or what is purported to be the best.

But these sport players and entertainers are rated by the audience that they serve. One may complain that the masses have poor taste, but hey, that's how people want to spend their money.

On the other hand, some CEOs get away with lousy performance, and still get rewarded handsomely. They have the board of directors in their pocket. As shareholders, we have no recourse but to sell the lousy stocks. Is there a better way?

Bogle had been vocal about corporate governance for a while, trying to get institutional investors such as MF and pension managers to be more active in selecting good company directors. I have not heard much about his activity in this area recently. I guess he gave up.

.


And what is worse is the newer corp structures which have non-voting shares issued to the public while the CEOs and founders have 100% voting power... such as Facebook.... IOW, there is no way to get rid of Zuckerberg as long as he wants to be in charge... sounds like a dictatorship....

At least in the old corp structure you can get a shareholder revolt going and do something if the person is doing a bad job... it might not be easy to do, but it was doable...

 

[Letj]

I think it is safe to say that CEOs take on significantly higher risk and have much more responsibility than the average worker, (they probably work more hours, also), but I suspect that the average worker does not realize this or see it this way.

I beg to differ. They do take on more risk but work harder? I am not sure. From my experience in mega Corp, the higher you go the cushier your job and much more perks not in line with your contribution. The middle managers and the analysts below them did most of the work. All the higher levels had to do was to request reports and analyses and sit in meetings and make decisions. In fact, the jobs were so cushy, they did not want to retire and why should they if the pions are at their beck and call. The disparity in upper management pay vs low level employees is not justified in my opinion and it is by far the widest pay gap compared to everywhere else in the world. The CEO for my mega Corp total compensation package is $25 million. I fail to see how that can ever be justified while we continue to raise the price of products.

 

[CaliKid]

I can't say for CEO's perse but I know in my world the boss/owner is the guy that has working nights/weekends, frequent sleepless nights and malpractice liability that lasts a lifetime. The employees generally work 40, sleep ok and have zero liability even if they make the actual mistakes. So while it's fun to make the "big bucks" I often wonder if it's worth it long term.

 

[pb4uski]

.


And what is worse is the newer corp structures which have non-voting shares issued to the public while the CEOs and founders have 100% voting power... such as Facebook.... IOW, there is no way to get rid of Zuckerberg as long as he wants to be in charge... sounds like a dictatorship.... ..

Yup. Those structures are for those n charge to keep control. If you don't like it then don't buy Facebook stock... problem solved.

A number of years ago I passed on a private equity investment opportunity because the founders stacked the voting to retain control... never liked the inability for owners to remove ineffective leaders.

 

[pb4uski]

.... The CEO for my mega Corp total compensation package is $25 million. I fail to see how that can ever be justified while we continue to raise the price of products.

What is $25 million divided by sales (the price of products)?

 

[Montecfo]

The comparison seems illogical to me. Employees are paid competitive wages or they leave. Same with CEOs. To be a CEO, especially a public company CEO, requires a rare skill set. The job becomes more complicated all the time. Yet the CEO can create significant value for shareholders, many multiples of pay. And that's why they are there.

Having said that, CEO pay which is not aligned with value created is poor governance, or a prelude to the CEO being sent packing.

Entertainers also have rare talents, deliver huge value and are highly paid. And avoid the critics of CEO pay, as far as I can tell. The value propositions are similar.

 

[bUU]

OK, 24 posts back!

It must be interesting carrying on a conversation when one participant only remember the last thing that people said.

The comparison seems illogical to me. Employees are paid competitive wages or they leave.

The comparison seems "illogical" the same way that taking care of Mamaw and Papaw when they get old might seem "illogical" to some, on the logical basis that Mamaw and Papaw are not bringing income into the household. A world where logic is the prevailing governing factor would be a horror. Compassion and justice are more important than such short term analytics.

Same with CEOs. To be a CEO, especially a public company CEO, requires a rare skill set.

And the point isn't that they shouldn't be paid more, but rather that the jump from the 20-to-1 ratio in 1965 to the 59-to-1 ratio in 1989 to the 286-to-1 ratio in 2015 was both unjustifiable and harmful to society. Again, short term analytics leads to myopic conclusions; to understand the problem requires higher-order considerations, such as the mature judgement that values people more than numbers, and integrates compassion and justice into conclusions.

 

[flintnational]

Porky? Is that you I hear in the background? And, by the way, how much do you make for your occasional appearance on this board? I think CEO's and workers alike would agree you are not adequately compensated for your efforts.

 

[pb4uski]

.....The CEO for my mega Corp total compensation package is $25 million. I fail to see how that can ever be justified while we continue to raise the price of products.

What is $25 million divided by sales (the price of products)?

The comparison seems illogical to me. ...

You are right. The comparison was only relevant in relation to Letj's concern that the CEO compensation impacted "the price of products"... my guess is that if the CEO's total comp package is $25 million then and excessive part of the compensation impacts product price by perhaps 1/2 of 1% or less, which is unlikely to impact customer decisions as to whether or not to buy that company's product.

 

[MichaelB]

Hopefully there’s no need for Porky, although a little less snark would help.

 

[Montecfo]

The comparison seems "illogical" the same way that taking care of Mamaw and Papaw when they get old might seem "illogical" to some, on the logical basis that Mamaw and Papaw are not bringing income into the household. A world where logic is the prevailing governing factor would be a horror. Compassion and justice are more important than such short term analytics.

And the point isn't that they shouldn't be paid more, but rather that the jump from the 20-to-1 ratio in 1965 to the 59-to-1 ratio in 1989 to the 286-to-1 ratio in 2015 was both unjustifiable and harmful to society. Again, short term analytics leads to myopic conclusions; to understand the problem requires higher-order considerations, such as the mature judgement that values people more than numbers, and integrates compassion and justice into conclusions.

I see the comparison as illogical because you have not established the reason the two prices in the marketplace should be related, and what that relationship should be.

Instead you are making an emotional argument.

Maybe 20-1 was always far too low, as was 59-1.

What relationship should the price of CEO labor have to shop floor labor? And why? If the ratios you cite are accurate, the pay levels appear to be unrelated perhaps because the skill sets needed for each vary and they operate in completely different markets with different supply-demand characteristics.

 

[marko]

Compassion and justice are more important than such short term analytics.

...but it doesn't pay the bills.

As my grandfather once told me "you want to make nice and feel good, go to church. This is a business; people come here to make money so they can eat".

 

[flintnational]

Hopefully there’s no need for Porky, although a little less snark would help.